Structural change and wage inequality in the manufacturing sector : long run evidence from East Asia

Abstract

This paper analyses the long run determinants of wage inequality in the manufacturing sector for a group of East Asian countries that have experienced rapid structural transformations over the last decades. In line with the Skill Biased Technological Change hypothesis, our results show that within manufacturing structural change –fostering the participation of higher skilled workers – is a strong determinant of the wage premium. However, the paper highlights also the peculiarity of the East Asian model, which shows how welldesigned education policies, a prudent macroeconomic management and selective policies towards foreign capital can contribute to buffer the pressure of structural change on wage inequality, even in an open economy context.